Where Are All the Customers? Good Question.

Although Wal-Mart's (NYSE: WMT) quarterly results seem to have calmed investors' worries about the discount giant, they shouldn't get too comfortable. Bloomberg's report regarding worrisome leaked emails by Wal-Mart executives last week is still a significant element for investors to factor in to their decisions about purchasing Wal-Mart shares right now.

"Where are all the customers? And where's their money?" one executive's email read, discussing a chill in January sales at Wal-Mart. In a more recent email, company executive Jerry Murray described month-to-date February sales as "a total disaster," and said that the start of February 2013 is the worst he's seen at the company in about seven years.

Wal-Mart's quarterly results today really shouldn't calm anyone. Although the retailer's earnings rose 8.6% and revenue increased 3.9%, same-store sales in the U.S. rose a relatively anemic 1% in the U.S. Meanwhile, Wal-Mart's released a cautious attitude regarding guidance for the current quarter, which obviously isn't going too well thus far.

Beleaguered lower-income consumers have surely been feeling the pinch from recent developments, like skyrocketing prices at the gas pump and the expiration of the payroll tax cut, which is a significant slam to the take-home pay of the lowest-paid workers.

Granted, when any of us ask "Where are all the customers?" we could consider some other options in the retail space. The aforementioned lower-income customers may be tempted to trade down to dollar stores, a trend that has precedent in recessionary years. Of course, they may be simply unable to buy many more discretionary goods given the pinches to already stretched budgets, so maybe many are hunkering down.

In fact, dollar stores face the same threats that Wal-Mart does even if they cater to similarly constrained consumers. Results from companies like Dollar Tree (NASDAQ: DLTR) , Dollar General (NYSE: DG) , and Family Dollar (NYSE: FDO) have recently faltered compared to those of headier years when they were stealing traffic from Wal-Mart, meaning that the price competition is extra-steep now or that lower-income customers are extra-strapped and cutting way back on spending.

Meanwhile, there's conventional competition to think about. Judging by market action, could some of the customers be at Safeway (NYSE: SWY) ?

Investors reacted euphorically to Safeway's quarterly earnings today, even though they don't even really look that great. Today's price is way overdone even if the grocer does claim it's not experiencing negative headwinds from the payroll tax hit at all. (A short squeeze could be part of the explanation.)

Of all the retailers named above, Safeway seems to trade at the most reasonable valuation, with a forward price-to-earnings ratio of 11. However, these names are all pretty much trading in tangent, with forward price-to-earnings ratios of 13 (Wal-Mart), 14 (Dollar General), 15 (Dollar Tree), and 16 (Family Dollar).

Do any of these look like a bargain right now? Heck, no. Even if Wal-Mart's loss is Safeway's or the dollar stores' gain, some of the customers may not be going for anything other than necessities, which is missing money indeed. These are going to be tough times for many retailers. (I discussed several other grocers in this recent piece.)

Where do you think Wal-Mart's customers and their money went in January and early February? Leave your thoughts in the comments box below.

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I think people are staying home more and when they do venture out, they are spending less. There are numerous possibilities as to why this is happening, but i think the #1 factor is the sub-standard wages corporations like Wal-Mart pay their employees. The driving engine of a strong economy is a thriving middle class. Years of wage stagnation has taken billions of dollars from the people who work for these companies. They can't spend what they don't have.

Until there is massive loan defaults and debt forgiveness we are in a downward spiral.

Ultimately, our financial industry has mad bad loans in support of their own paychecks and debt servitude. Hank Paulson bailed them out and did not make them suffer the risk they were paid interest to take.

Secondly our investment industry has positioned itself to take the savings opportunity away from working harder or cutting back by being able to increase the price of every commodity through hedging, without taking delivery or adding value, ie. price discovery! They saved 1% of their paycheck and we discovered we could bid corn up a 1% higher!

But that money did not go to walmart or the productive workers. it went to the "investors" who extracted the rewards of someone else's work.

And it will not go to the banks investors either. It will go to bonuses and options.

cc is correct. This has truly been a "jobless recovery", businesses have discovered that they can increase production without hiring additional workers, but the unemployed can't buy much of anything. All of the productivity gains from computerization, outsourcing, and other efficiencies have gone almost solely to the executive suite. When the CEO's pay goes from $2M per year to $8M per year, he does not buy a lot of extra goods with that money. Mostly, he invests it, which is why the stock market is still holding up.

My pay has been flat over the past five years, and I've seen plenty of co-workers' jobs get outsourced to India, China, and elsewhere. If they are working now, it is generally at much lower pay.

Meanwhile, if the Sequester holds, federal spending this year will still be $15B higher than last year, and 30% higher than five years ago. Is your income 30% greater than it was five years ago?